JPMorgan Chase is working with Ethereum startup EthLab on a new blockchain project called Quorum, the Wall Street Journal and CoinDesk report.

The two parties will develop a private, permissioned blockchain built off of the public Ethereum network's code. This is the latest project to come out of JPMorgan Chase's working group, the Blockchain Center of Excellence.

Unlike other banks, JPMorgan is not building an entirely new blockchain system from scratch — it is using the concept of a permissioned blockchain. The bank is utilizing a publically accessible code to develop its solution. But unlike public blockchains such as the one used by Bitcoin, JPMorgan's will be private and permissioned, meaning the bank will be able to limit access to transactions to selected parties, such as parties in a trade or a regulator. This will make it private and secure enough for traders to use for transactions, and accessible enough for regulators to provide oversight. Such functionality is considered a vital element needed before banks will adopt blockchain technology widely.

This approach stands to give JPMorgan significant advantages over its rivals. Using existing code to build a blockchain solution is significantly cheaper than developing its own network. Moreover, by using a publically accessible network, JPMorgan can build a blockchain that could theoretically be plugged into other systems built on the same network. For context, institutions building their own networks may find their end solutions to be incompatible with each other. This ease-of-use could potentially give JPMorgan an edge over other banks experimenting with blockchain, as its solution may be more likely to be widely adopted.

However, JPMorgan has not addressed concern over Ethereum's security flaws. The network has suffered significant security breaches recently — in its most severe hack, the equivalent of $80 million worth of cryptocurrency was stolen, and the most recent attack occurred just last month. The bank will need to address these concerns before it moves into any live testing phase that involves customers' money.

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain.

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.

Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.

Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years.

In full, the report:

Examines the funding increases that are pouring into blockchain

Assesses why blockchain is becoming so popular and what factors are driving up increased research and development

Explains in full how blockchain technology work and what assets make it valuable and vulnerable

Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them

Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP

Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.